A ruling that experts are calling incentive for pharmaceutical companies to outsource manufacturing and avoid infringement liability.

In November, a ruling was made with the potential to significantly impact patent infringement liabilities going forward.

According to a ruling in Momenta Pharmaceuticals, Inc. v. Teva Pharmaceuticals, Inc.: under the Hatch-Waxman Act, quality-control testing of drugs is not considered to be the actual “making” of a product. Quality assurance is no longer ensured, as the infringement for importation of products made by a patented process does not extend to the testing of a finished product.

Some see this decision as providing added “incentive for pharmaceutical companies to outsource manufacturing and avoid infringement liability.”

As a result of this recent U.S. Court of Appeals for the Federal Circuit ruling, drug manufacturers who outsource quality control measures abroad may have been given a loophole to avoid patent infringement liability.

William L. Warren, Partner at Sutherland Asbill & Brennan LLP, participated in a Q&A about the recent developments.

Q: Could you describe some of the history behind the Hatch-Waxman Act?

Warren: The Hatch-Waxman Act was enacted in 1984 to establish a streamlined regulatory approval and patent litigation mechanism for generic pharmaceutical price competition. A significant portion of the statute provides a means by which generic or quasi-generic 505(b)(2) pharmaceutical applicants to the FDA can challenge the patents listed by brand name owners in the FDA “Orange Book” in order to enter the market prior to patent expiration. The first successful “Paragraph IV” challenger of a listed patent, for either non-infringement or invalidity, is rewarded with a 180 day period of generic marketing exclusivity.

Under the Act, brand name pharmaceutical product owners are given initial terms of marketing exclusivity of five years for new chemical entities, three years for new methods of treatment, and six months for conducting studies in pediatric populations, before the FDA can approve a generic application. The Act also permits patent term extension for up to two years due to FDA regulatory delays.

Q: Could you describe in further detail the November 10 ruling in Momenta Pharmaceuticals, Inc. v. Teva Pharmaceuticals, Inc.?

Warren: Section 271(e)(1) of the Hatch-Waxman Act provides generic companies with a “safe harbor” to prepare for product launch by protecting certain activities, such as product development and manufacturing, from patent infringement liability while preparing information for potential submission to the FDA. Before the Momenta case, there had only been very limited pre-marketing activities which did not qualify for this safe harbor, such as the use of a drug screening standard and the use of an analytical tool for particle size testing. The Momenta case further limits the safe harbor to protection against infringement of routine post-approval quality control analytics. The court also ruled that the statutory provisions of section 271(g), which protect against importation of articles made abroad by a process patented in this country, do not extend to the methods of testing a final product or intermediate substance to ensure that the intended product has, in fact, been made.

In this case, Momenta and Sandoz were the first to market a generic version of Sanofi’s anticoagulant Lovenox® (enoxaparin). Momenta developed and patented (U.S. Patent No. 7,575,886) a method for analyzing enoxaparin to determine whether it has the appropriate chemical structure, and asserted that patent against generic rivals Teva and Amphastar. Both Teva’s and Amphistar’s enoxaparin products were tested by the infringing method. However, only Amphistar’s U.S.-based post-manufacturing analysis was found to be infringing, whereas Teva’s offshore product analysis was not.

Q: How does this ruling provide added incentive for pharmaceutical companies to outsource manufacturing and avoid infringement liability?

Warren: This ruling apparently closes one U.S. safe harbor from infringement activity, and opens another offshore safe harbor for generic and biosimilars manufacturers to conduct patented post-manufacturing and post-approval batch testing. Under this recent ruling, companies cannot be held liable in the U.S. for conducting patented post-manufacturing product testing outside of the U.S. The ruling also incentivizes brand and generic companies to patent the post-production quality control procedures in the U.S. and abroad. Because these types of analytical techniques are usually required for more complex and, thus patentable, drugs and biologics, this ruling is expected to have a greater impact on the growing field of biosimilars competition.

Q: What are some of the issues that have arisen with regards to infringement of the Hatch-Waxman Act?

Warren: Perhaps no other single piece of legislation has been so well-vetted through litigation in the last 30 years. Unlike most patent litigation, which settles out of court, the high stakes of pharmaceutical products have often driven this litigation through multiple appellate decisions. Dozens of issues related to the Hatch-Waxman provisions have been litigated, including what types of patents can be listed in the FDA Orange Book, the adequacy of a Paragraph IV notice, and when generic applicants can share or forfeit the 180-day exclusive marketing period. More broadly, these cases have also established important legal precedent for the standards of claim interpretation and validity of all patents.

Q: What are some of the statutory regimes related to the patenting of manufacturing and quality control processes?

Warren: Patents may be granted on any new and non-obvious compound, combination, formulation, method of use, method of manufacture, and method of analysis. Methods of manufacturing and analysis are generally not permitted to be listed by a brand name company in the FDA Orange Book. However, those patents can still be enforced against competitors, as in the Momenta case. Patents must be separately obtained in each country for which protection is desired.

Q: How can pharmaceutical companies avoid infringement or liabilities under Hatch-Waxman?

Warren: Generic competitors must be very proactive in assessing the patent landscape of a targeted product. Identifying products with Orange Book-listed patents, which can be overcome through non-infringing formulations or by identifying a basis for invalidating the patents, is a primary business model for winning the valuable 180-day exclusive marketing period. However, there are frequently non-listed patents and third-party patents that must be identified and cleared in advance of commercialization. Typically, a patent attorney is engaged for the purpose of generating a product clearance strategy and a freedom to operate opinion. In some situations, such as in the Momenta case, the generic or biosimilars producer may develop its own patentable improvements that can be used to exclude other competitors, or to negotiate a cross-license with the brand name producer.

Q: How does this ruling tie into routine quality control testing of generic drugs for pharmaceutical companies?

Warren: Brand name drug and biologics companies try to block competition by patenting as many aspects of their business processes as possible. However, routine quality testing procedures of old drugs are typically not under patent protection. This ruling is more relevant to newer products that require complex, patented analytics. Once a generic company defines its preferred route of synthesis, formulation and analytical methods, a comprehensive patent clearance search and opinion should be obtained, before the larger scale-up and regulatory approval investment is made.

Q: Do you foresee any challenges for biologics and biosimilars patents?

Warren: The Biologics Price Competition and Innovation Act of 2009 (BPCIA) established an analogous system for abbreviated approval of biosimilars to brand name biologics. This law provides a 12-year initial exclusivity term for brand name biologics before allowing approval of a biosimilar applicant, due to the typically greater expense and time required to develop a biological medicine, such as a monoclonal antibody. The initial lawsuits concerning the BPCIA have focused on the 180-day notice of commercial marketing provision for challenging patents, which requires an intricate exchange of patent disclosures and related information. The currently pending lawsuits in this field mainly relate to whether this notice and the so-called “patent dance” are statutorily required or are optional for the biosimilars applicant. Post-manufacturing analytics play a significant role in commercializing biologics, so more patent litigation, similar to the type in the Momenta decision, will occur. Given the even higher commercial stakes for biologics than for traditional small-molecule pharmaceuticals, many years of patent litigation is anticipated to determine the requirements and boundaries of this statute.

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